USD JPY Consolidating; Could be Setting Up for Rally

The USD JPY is consolidating inside the retracement zonecreated by the 84.73 to 86.37 range. This zone is 85.55 to 85.35. If the market can form a support base thenlook for it to make a run at the swing top at 86.37. Not only will a breakoutover this level turn the main trend to up on the daily chart, but it will alsoconfirm last week’s weekly closing price reversal bottom.

The USD JPY is consolidating inside the retracement zonecreated by the 84.73 to 86.37 range. This zone is 85.55 to 85.35. If the market can form a support base thenlook for it to make a run at the swing top at 86.37. Not only will a breakoutover this level turn the main trend to up on the daily chart, but it will alsoconfirm last week’s weekly closing price reversal bottom.

The Dollar/Yen is also sitting on a major downtrending Gannangle from the 94.98 top at 85.48. This angle is acting like a pivot price.Look for the market to strengthen above it and weaken below.

Based on the current chart formation, it looks as if the keywill be breaking out over and sustaining a move above 85.55. This scenariowould put the market on the bullish side of both the 50% level and thedowntrending Gann angle.

The short-term charts indicate that the market may havetrouble at 86.42 to 86.82 and 86.94 to 87.46. Once these areas are cleared,then watch for a possible acceleration to the upside with 89.85 a potentialupside target.

The possibility of an intervention may still be lingering inthe air. This speculation fueled last week’s rally, but weak U.S. economicdata has prevented the market from following through this week.

The Japanese government and the Bank of Japan may still beconsidering an intervention, but at first wanted to weaken the Yen through averbal intervention. At this time it is possible, that government officials andthe BoJ are trying to drum up support for an intervention.

Another reason for a rally would be the possibility of astock market rally. The market is looking good this week and a breakout to theupside could renew interest in the carry trade, a strategy that involvesselling the Yen.

Traders should focus on one area of the chart at this time,85.36 to 85.55. A close below the lower level would indicate weakness, but aclose above the upper level could indicate the start of a strong rally.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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